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Foxtel gets ready to cut prices

Dominic White and James Chessell

The new bundles are set to see the price of a traditional premium Foxtel subscription fall below $100. Photo: Rob Homer

Foxtel is preparing to drop the price of its premium pay television service below the $100 mark to counter cheaper competition in pay TV.

The joint venture between News Corp and Telstra is gearing up for a massive advertising campaign as it prepares to launch its broadband service, designed by former Seven West Media executive Rohan Lund.

It is understood that bundles for "triple play" Foxtel – pay TV, broadband and telephone – will be structured to cut the price of a traditional premium Foxtel subscription to below $100.

There is speculation the company may give users more options to pay for Foxtel shows on different devices.

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The moves could affect average revenues per user, which are among the highest in the world for pay TV, but would boost subscriber numbers.

Foxtel, which has hired several hundred call centre staff to manage the launch of its broadband service, is under pressure to drop prices because of the increasing availability of cheaper video content – as well as pressure on household spending.

US subscription video-on-demand giant Netflix, which has more than 200,000 unofficial Australian subscribers, has tested the waters for a potential official launch in Australia.

Foxtel is led by Richard Freudenstein, who, in his former role as chief executive of BSkyB, helped the British pay TV business become Britain's second-biggest internet service provider from a standing start in just five years.

Its aggressive campaign included giving broadband away free to its pay TV subscribers.

The importance of Foxtel to its 50 per cent owner News Corp Australia was underlined last week when News's internal accounts for the year to June 2013 were leaked.

They showed that News' investment income from Foxtel more than doubled from $43.4 million to $119 million, versus a budgeted $48.6 million, helped by News increasing its stake from 25 per cent to 50 per cent part-way through the year.

Foxtel reported a 16 per cent jump in underlying net profits to $576 million for the year earlier this month.

However, revenues were just 1.4 per cent higher at $3.14 billion, underlining that growth is already being driven by cheaper subscriptions.

The company is preparing to launch its much-vaunted third-generation set-top box and digital recorder, the iQ3, in the fourth quarter of this year – about 12 months behind schedule.

It is also is planning a major refresh of its main channels to coincide with the multimillion-dollar upgrade, which it hopes will help to reduce customer defections.

A spokesman for Foxtel said: "Foxtel has previously announced we would launch a triple play of TV, broadband and home phone. We are gearing up within the company to launch these new products. That includes hiring significant numbers of call centre and technical staff.

"We will also be launching iQ3. Both of these initiatives will be supported by significant marketing campaigns. We'll be making announcements about pricing of the new box and the triple play bundles in due course."